2019 Budget: FG Make Plans For N8.9trn
To consolidate on its aggressive spending on infrastructure and consign the recent recession into the dustbin of history, the Federal Government has come up with the estimates of its expenditure and incomes for next year, with the fiscal deficit set to hit N2.59tn.
The Federal Government is planning to spend a total of N8.9tn in the 2019 fiscal period.
The amount is an increase of N305.86bn over the original estimates of N8.61tn presented to the legislature on November 7, 2017 by President Muhammadu Buhari for the 2018 fiscal year.
However, the planned N8.9tn spending will be about N220bn lower than the N9.12tn 2018 budget, which was passed by the National Assembly and assented to by the President.
The government is also planning to raise a total of N6.32tn as revenue next year to finance the budget.
The N6.32tn, when compared to the N7.16tn revenue projection approved for the current year, represents a decline of about N840bn.
The figures are contained in the Fiscal Strategy Paper of the Federal Government, which was obtained by our correspondent from the Budget Office of the Federation in Abuja.
The document showed that as a result of the planned increase in spending, the fiscal deficit of the government was expected to rise from the current N1.9tn to N2.59tn in 2019.
Further analysis of the document showed that the ratio of the country’s deficit to Gross Domestic Product was estimated to be at 2.08 per cent by next year.
It was also revealed that capital expenditure as a percentage of non-debt expenditure had been estimated at 41.28 per cent for 2019.
In the same vein, capital expenditure as a percentage of the total Federal Government spending is expected to drop from 31.5 per cent this year to 29.57 per cent next year, while recurrent expenditure as a percentage of government spending is being planned to rise from 68.5 per cent to 70.43 per cent.
Further analysis showed that debt service to revenue ratio might rise from this year’s rate of 30.76 per cent to 36.53 per cent in the 2019 fiscal year, while deficit as a percentage of the total Federal Government revenue might increase from 27.22 per cent to 40.95 per cent.
Oil production volume, according to the document, is expected to rise from 2.3 million barrels per day to 2.4 million barrels per day, with the budgeted oil benchmark price pegged at $50 per barrel.
In terms of revenue that will be available to fund the expenditure, details of the N6.32tn projected revenue showed that oil was expected to generate N3.24tn next year as against the budgeted N2.98tn for the current year.
On the other hand, non-oil revenue is expected to contribute N1.55tn next year as against the N1.24tn budgeted for this year.
A breakdown of the N1.55ttn non-oil revenue showed that N906.1bn is expected to be collected as Companies’ Income Tax compared to the 2018 budgeted amount of N658.5bn, while N264.1bn is expected to come from Value Added Tax as against N207.51bn projected for this year.
The Nigeria Customs Service, according to the document, is expected to provide the sum of N324.25bn for the Federal Government next year, which is marginally lower than the N324.86bn set for the agency for 2018.
Other sources of revenue to finance next year’s budget, according to the document, are independent revenue, which is projected at N890.34bn as against N847.94bn for this year; and special levies of N12.9bn as against N17.21bn in the current fiscal period.
In the same vein, the sum of N203.37bn is expected to be raised through domestic recoveries, assets and fines as against N374bn this year.
Similarly, about N168.97bn is being planned to be realised from other recoveries in 2019 compared to N138.43bn for the current year.
Grants and donor funding are expected to contribute N209.9bn to government’s revenue next year as against the N199.9bn captured in the 2018 budget.
On the expenditure side, the strategy document stated that out of the projected N8.9tn spending, N2.38tn would go for capital expenditure next year, as against N2.42tn for this year.
Debt service is expected to gulp N2.31tn next year as against N1.95tn this year, while N3.16tn is projected to be spent on recurrent expenditure (non-debt) as against N3.51tn provided in the current year’s budget.
Other projections for the 2019 fiscal year are personnel costs of N2.1tn; overheads, N210bn; pensions, N220bn; Power Sector Reform Programme, N251.4bn; service wide votes, N208.6bn; and the Presidential Amnesty Programme, N70bn.
Finance and economic experts said that in view of the fact that oil prices had been on the upward trend coupled with the aggressive tax revenue drive of the Federal Government, implementing a budget size of N8.9tn would not be too difficult.
The Registrar, Institute of Finance and Control of Nigeria, Mr Godwin Eohoi, stated, “It will be possible to finance the budget, because looking at the oil price, it was at $50 to a barrel when the 2018 budget was presented, but now it’s selling far above $70 per barrel.
“So it is still within acceptable limit to have the benchmark at $50 per barrel.
“There are other windows available to the government to generate more revenue, considering the aggressive drive to raise tax revenue from six per cent of the Gross Domestic Product to 15 per cent; so, I think the budget is implementable by the government.”
A developmental economist, Odilim Enwagbara, said the size of the Federal Government’s budget was still low compared to the country’s GDP size.
He noted that for the budget to make any significant impact, it must be raised to about 10 per cent of the GDP.
Enwagbara stated, “We should also raise the oil benchmark price to $80 per barrel to enable us deploy more revenue to fund the budget. The budget should be increased further to about 10 per cent of our GDP, because we have one of the lowest budgets in the world.
“When South Africa is budgeting about $200bn, Nigeria is having about $28bn budget for the year; this is very low for us as a country.”
A former Director General, Abuja Chamber of Commerce and Industry, Chijioke Ekechukwu, said the budget figure could be absorbed by the expected revenue from oil and other sectors.
He explained, “This revenue expectation does not obliterate the deficit end of the budget, which will still be funded by debts. Much as the debt profile of Nigeria is rising every day, the debt to GDP ratio is still not above any tolerable benchmark.
“As far as the increase is not arising from indiscriminate and arbitrary increase for selfish gains, the budget will be implementable.”
